Is the Economy Catching a Cold?

Before we begin, a couple of critical highlights: 
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• Did you see the MPR interview last week with Ramsey County Attorney John Choi? Saint Paul has seen a 70% reduction in homicides so far this year, and dramatic crime reductions across the board. Read the article to talk about the strategy. Worth celebrating! 
• Check out highlights from our 4th annual Career Connect Day.  
• And Twin Cities Startup Week was everything we’d hoped it would be. View the photo gallery here!

How is the economy doing? That depends on who you ask

Morning Consult’s latest data pegs the U.S. economic “temperature” at 63 degrees F, cooler than their “ideal” of 70 degrees F. That suggests conditions are cooling – but not dramatically. Inflation and unemployment both are edging upward, and consumer sentiment is slipping. While spending hasn’t yet declined, signs point to softer demand ahead. 

Mixed Signals from the Labor Market 

With government data delayed due to the shutdown, alternative sources offer conflicting views:  

• ADP reports a contraction in jobs
• Revelio Labs reports a modest increase
• The Chicago Fed recently released labor metrics, estimating that unemployment stayed close to its August level of 4.3%

The government shutdown clearly is adding uncertainty. Federal employees are furloughed, turning to savings to survive in the short term. Meanwhile, conversations I’ve had with manufacturers have been about the impact of tariffs on steel prices – and resulting layoffs.   
 
Consumer Confidence and Spending Trends

Consumer confidence is waning. Both Morning Consult and the University of Michigan’s Consumer Sentiment Index reflect that September marked the lowest confidence levels since April, erasing gains made over the summer. 

In Minnesota, the Federal Reserve Bank of Minneapolis released the results of a new survey of Minnesota's tourism and hospitality sector — think hotels, food, drink, and entertainment. Over half reported declining profits, citing high prices and labor costs as major concerns. Reduced traffic and revenue are squeezing margins.

Inflation and ResilienceConsumers continue to feel the pinch of rising prices. Bloomberg reports a consensus estimate of 3.1% annual consumer price growth, the highest since May of 2024.  
 
Yet, despite these headwinds, consumer spending remains a bright spot. September marked the 8th consecutive month of positive year-over-year growth in consumer spending, according to Morning Consult. 
 
While the economy is by no means in a freefall, it’s clearly facing headwinds. Cooling labor markets, reheating inflation, and shaken consumer confidence paint a picture of cautious resilience. The coming months will be critical in determining whether this chill deepens – or if the economy can warm back up.  
 
See you in the trenches,
B

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